Truth, Errors, and Lies: Politics and Economics in a Volatile World

By Grzegorz W. Kolodko

An approach to the challenges of globalism that rejects simplistic solutions, from “one of the most acute observers of the international economy” (Francis Fukuyama, New York Times-bestselling author of Identity).

Deploying a novel mix of scientific evaluation and personal observation, Grzegorz W. Kolodko, one of the world’s leading authorities on economics and development policy, begins Truth, Errors, and Lies with a brief discussion of misinformation and its perpetuation in economics and politics. He criticizes the simplification of complex economic and social issues and investigates the link between developments in the global economy and cultural change, scientific discoveries, and political fluctuations. 
 
Kolodko, who was a key architect of Poland’s successful reforms, offers a provocative study of globalization and the possibility of coming out ahead in an era of worldwide interdependence. Deeply critical of neoliberalism, which sought to transfer economic control exclusively to the private sector, Kolodko explores the virtues of social-economic development and the new rules of the economic game. He concludes with a look at our near and distant future, questioning whether we have a say in its making.
 
“One of the heavyweight economic thinkers of post-communist Europe.”—The Economist
 
Nominated for the Michael Harrington Book Award

• Language: English
• Publisher: Open Road Integrated Media
• Release date: Jan 17, 2011
• ISBN: 9780231521567

Book preview

CHAPTER ONE

The World, Words, and Meaning

Where Truth, Errors, and Lies in Economics and Politics Come from and What to Do to Make Truth Come First

Difficult economics is best explained through simple, meaningful words.

ECONOMISTS are supposed to describe and explain what’s happening. The best ones know what’s going on and can convince us. Problems begin to crop up when they

Know, but cannot convince us.

Don’t know but try to convince us anyway.

Know that things are different from what they are trying to convince us of.

In the first case, there is nothing to do except to try to help them get the message across. Appearances notwithstanding, this is no easy task. The effort needs to be supported by publications, informational programs, teaching, the independent media, progressive nongovernmental organizations, and people of good will—who are never in short supply. First, however, they need to know how things stand.

In the second case, when people don’t know how things really stand but try to convince us of their concept, they’re just plain wrong. Then it’s necessary to argue calmly with them and to pay attention to the other side, because anyone can be wrong—including us. We can tell that the people propounding the mistaken views have good intentions. As they see it, they are trying to get at the truth and to share it with others. Therefore, they are allies in the struggle for truth, and all it takes to bring them (or ourselves) into line is to make them aware of their mistakes and work out a common position.

The worst case is the third one, when people deliberately proclaim falsehoods. In politics, this is an everyday occurrence—politics is about results, not truth. Evading the latter sometimes serves the former, which is why veracity and lying are treated instrumentally in politics. This explains why many of the economists who enter politics become enmeshed in falsehood. Truth is a fine thing at a scientific conference, but not at political rallies, which, in our day, usually take place in front of the spotlights and the TV cameras. After all, it would have been unthinkable in Polish government policy at the turn of 1989–90 to announce that the national income would fall by almost 20 percent over the next two years and that there would be 3 million unemployed within four years. The public would not have accepted such policies, or those responsible for them. Honest economists issued warnings,¹ only to be shouted down by their more obeisant colleagues. In Russia, similarly, it would have been political suicide to declare in 1992 that neoliberal policies would lead to seven lean years in which production fell by more than half and a vast part of the population would face social exclusion.

It is too easy to dodge the truth in economics, and the tolerance for prevarication—despite its evident harmfulness—is much greater than in other branches of knowledge. Another reason for this is that it is easier to hoodwink people in economics and to convince them of relationships that do not actually exist in economic processes like saving, accumulation, investment, production, trade, and finance. When economists make statements that sooner or later turn out to be false, we are left facing a dilemma: Were they wrong, or lying? There are no other possibilities, except perhaps that they were partially wrong and partially lying. These arguments and examples—and it is not difficult to find more of them on the basis of the experience of many countries in many different periods—should help in understanding why bad things are sometimes read as good, and should provide some of the material needed to avoid mistakes.

In the struggle for truth in real science, with a capital S, it is necessary to cultivate a critical attitude. The approach to the truth also often requires an honest public debate, despite the frequent risk that the distinction between truth and untruth is sometimes impossible to attain in common discourse. Nevertheless, this is a way to win allies for the truth. In the social sciences, including economics, this is very important, because the dissemination and popularization of research results are important in implementing them. People were occasionally burned at the stake for defending the scientific truth in public, because a conservative and brutal Inquisition wanted it that way. Nowadays, portions of the media willingly stand in for that physical, psychological, and political terror which, we should remind ourselves, was cruel in the short term but ineffective in the long term.

Public debate and its instrument, the media, constitute a two-edged sword. On the one hand, it is impossible to pass the torch of knowledge to a wider audience without them. On the other, they enable demagogues and liars to reach that same audience. There is no alternative but to pick up the cudgels and swing the sword—the word—so as to deliver blows while suffering as few as possible oneself. This is not easy by any means.

The best way to fight is to call things by their proper names. One must understand the essence of irrationality—its sources, mechanisms, and dynamics—in order to proceed rationally. This can sometimes be more difficult than surrendering to intellectual laziness and going along with the arguments of charlatans or simple fools. Carl Sagan wrote that one of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It is simply too painful to acknowledge—even to ourselves—that we’ve been so credulous.² This kind of deception can influence important processes that affect great numbers of people. Much has been written about how people are led astray in science and how they can persist in error for long periods, placing their trust in nonsense, falsehoods, pseudoscience, myths, and demagogy.³ Seldom is the subject written about in economics, unfortunately.

In his book How Mumbo-Jumbo Conquered the World,⁴ Francis Wheen writes somewhat mockingly, somewhat ironically, and above all insightfully about this. Perhaps mumbo-jumbo should be treated as a special category in sociology and political science; it plays no small role in economics.

The recipe for economic mumbo-jumbo is an easy one: First, simplify as much as possible, and then exaggerate. For example: If you privatize everything, then everything will improve rapidly. Or the converse: Nationalize everything, and then everything will get better and better. It all depends on the epoch in which the mumbo-jumbo is intended to addle our brains. Wheen refers to the far-reaching consequences (or the nonsensical interpretations) of such statements as the neoliberal Thatcherite TINA (There Is No Alternative) or Fukuyama’s the end of history⁵—although in the latter case there was a great deal of misinterpretation of Fukuyama’s original thought.

It is a truism that there was no shortage of alternative paths to development even when neoliberal Thatcherism was flourishing and refused to notice or accept any alternatives to its dream of hegemony. Nor is there any shortage of them now, when neoliberalism is beginning to wither away. As for history, it goes on, as does humanity with all the problems that, even on the historical scale, remain abundant.

Another example of mumbo-jumbo is the slogan Innovate or Die! Recently, this has been a popular credo in management schools. Although no reasonable person would doubt the enormous significance of innovation both for increased productivity and for economic progress in general, we know that growth has been possible for whole centuries without any particular innovative capacities. Even today the majority of countries (national economies) and the great majority of companies are hardly dying from a lack of innovative talent. They do quite well and earn a decent living, thanks to imitation.

The ones that die are not those incapable of thinking and acting innovatively in terms of introducing new production methods and products, but rather those incapable of competing. It is perfectly possible to compete without innovation. The repetition of such an empty slogan by the media, governments, business leaders, business school professors, consultants of all kinds, and management gurus encourages mistakes by diverting attention from the authentic requirements for and sources of success in business.⁶ Innovation is for those who are good at innovating, but not for everyone.

Unfortunately, these and other examples of mumbo-jumbo have done immeasurable harm, in material as well as intellectual terms. After all, we exist in a world not only of words, but also of actions, including erroneous and harmful actions. Many of them are irreversible. The costs and the damage have already been suffered, and the possibility of any gains belongs to the past. Time is always a factor. Even if some good finally comes out of the sacrifices made and the burdens borne, the generational process is such that many of those who paid the price will already be in the next world.

In the postsocialist world, older people remember the effort at making them happy through the forced collectivization of agriculture, while the young still bear the burden of the naïve and injurious neoliberal idée fixe known as shock therapy. The failed efforts to carry it out led to enormous costs that could have been avoided, and yielded far fewer therapeutic benefits than could have been achieved by choosing changes of a different kind.⁷ The fact that some people prefer to forget such rubbish as shock therapy (or would like to convince themselves and others that it somehow succeeded) makes it necessary to get to the heart of the matter—just as in the case of the unfortunate collectivization of two-and-a-half generations earlier. This necessity has to do not only with historical truth—always badly falsified in regard to eras that have just ended—and the facile accuracy of economic interpretation in hindsight. It also has significance before the fact, because the historical process of development is at different stages in various parts of the world, and it is still not too late to avoid many mistakes. All that is needed is to draw the appropriate conclusions from other people’s experiences, and the lessons of accomplishments and failures in other countries.⁸

Iran is now attempting to implement a program called Justice Shares, which consists of the distribution for free of part of the state assets to the poorest segment of the populace. It would be far better to sell these assets for the highest possible price on the capital markets and use the income from denationalization for responsibly targeted social programs to limit the causes and symptoms of poverty. The Iranians had a chance to avoid the mistake of economically senseless, ideologically motivated free distribution—a mistake that was not avoided in some postsocialist countries.

In Poland, we also had an experience with mumbo-jumbo in the form of the Universal Privatization Program, a term that once dominated the front pages, especially the front page of one particular newspaper. When it later became clear to everyone that the economic payoff was not worth the ideological exertion, we had already entered the domain of consequences. Neither the goal of microeconomic transformation nor the social aim of the accelerated formation of a middle class was achieved. The ambitions of the instigators of this and similar programs were satisfied, as were the hardly inconsiderable interests of the financial and legal intermediaries who profited handsomely.

In Poland, we now have a chance to avoid another bad idea—the so-called flat tax. Some of our neighbors have put the notion into practice, where economic mumbo-jumbo has triumphed over common sense. At some point, they will have to reverse themselves, if for no other reason than because they will be unable to maintain the aging segment of their societies without a progressive tax. With a growing proportion of retirees, the working part of the society will have to pay higher taxes than the retirees and disability recipients, because otherwise the social support system will be unbalanced. Wealthier people must pay higher taxes, because otherwise the social system suffers from disequilibrium. The flat tax is not as simple as claimed by its advocates (and potential beneficiaries). Rather, it is indecently simplistic enough to seduce large numbers of people. Classical mumbo-jumbo on the basis of a classic recipe: a simple and overhyped panacea for something that seems to upset many people. Who likes paying taxes? In fact, it is a matter of accommodating the few. Some people have already been taken in, and naïvely place their trust in a concept that is intrinsically harmful to them. That’s the purpose of this kind of economic rubbish—deceiving some to the benefit of others.

Economics is like a path through the woods: It’s easy to get lost. When you turn around and go back, what seems to be the same path is in fact not the same. The process of change in economic relations is something natural and completely obvious, at least past a certain level in the development of civilization. Change is an economic category unto itself, and it can be very profound, extending far into the substance of the phenomena or processes being described. Sometimes change occurs very rapidly on the historical scale—even more quickly than the change from one generation of economists to the next. This is one of the reasons that they sometimes find themselves unable to keep up. They cannot get a theoretically accurate grip on the present because they are looking at it through yesterday’s eyes. Even worse, they are sometimes peering at an image of times already past, different from the here and now. When they cling too tightly to their obsolete interpretations, they begin getting things wrong. They don’t know what the truth is—and how can they proclaim the truth if they don’t know it? It has faded away, along with the times in which it was adequate. Times change. Views must change.

Unfortunately, instead of adjusting to change, economists often turn to more advanced countries with different cultures, superior technologies, and more mature institutions. They borrow interpretations, elements of theory, and even whole schools of thought that they then have trouble adapting to local conditions, because the adaptations fit their own conditions like two left shoes. This has become especially prevalent in recent years under the influence of domination by a single way of thinking—neoliberalism, which has been imposed on others by the most powerful interest groups connected with big international capital. More than one country has paid a high price for disdaining regional and national differences under the widely proclaimed but naïve neoliberal slogan one size fits all, which is a call for ignoring local differences in the application of economic policy. Even when countries pay a high price, however, it is always good business for someone.

A fixation on the most developed economies leads to the uncritical importing of the ideologies that are popular and regarded as mainstream social science there. In economics, this is an epidemic. If they shine at all, local analysts and commentators shine with a reflected light. No one demands that they shine like the sun, but let them at least have a decent lamp, or even a candle, of their own.

It is a real event when a Nobel Prize winner who is an outstanding economist (the two do not always go hand in hand) singles out a local economist for praise. This is what happened when Joseph E. Stiglitz of Columbia, perhaps the most cited authority in the field, referred to theories advanced by a Polish economist who had obtained positive real-world results.⁹ What happened? The facts of the matter notwithstanding, the Polish economist’s local adversaries were infuriated. An ideological activist of neoliberal tendencies with pretensions to an academic career attempted to discredit the Nobel Prize winner and called for a boycott (sic!) of his works, all because he quoted the innovative, proven views of a Polish economist who is unpopular with the neoliberal extremists. The strident advocate of the party line (where do we know that from?) wrote that

the fact that it is not worth paying attention to Stiglitz may be shown from the passage in his book Globalization and Its Discontents devoted to Poland: Poland introduced a gradualist privatization policy, while at the same time building the basic institutions of a market economy, such as banks that actually lend money, and a legal system that demands respect for contracts and honest bankruptcy proceedings. Quoting Grzegorz W. Kolodko as an authority, [Stiglitz] states that our country did not engage in rapid privatization and did not place the lowering of inflation above other macroeconomic considerations. Instead, it emphasized such matters as achieving democratically expressed support for reform, which resulted in efforts to keep unemployment low. . . and to create the institutional infrastructure needed for the functioning of a market economy.. . . it is hard to resist the impression that these lovely words must be about some other country. This is why Stiglitz and what he writes about other countries and their problems cannot be taken seriously.¹⁰

As can be seen, there is no limit to folly—or to destructive emotions.

Simply transcribing from the lingua franca of contemporary science—English—into the local idiom, whatever it may be, is a widespread practice. This is understandable in view of the fact that the science of economics is most highly developed in the English-speaking countries, and especially in the United States and Great Britain. The problem is that the things that are true there might also be true here—but not necessarily, for the simple reason that a vast part of economics refers to the changing conditions under which people make lives for themselves and enter into group interactions. As a science, economics must fit reality, and that reality differs over time and space. Over there, it might be tomorrow, whereas here it’s still today, and somewhere else it’s yesterday.

I regard economics as a science that not only explains the working of the mechanisms that govern economic processes—production and consumption, saving and investment, buying and selling, the flow of streams and resources—and the social interactions that occur in the course of these processes, but that also serves as a basis for the formulation and realization of effective strategies for long-term development. Good economics is both a descriptive science that depicts things as they are and a normative science that issues pointers and prompts about the way things should be. That is, it should not only formulate detached, passive forecasts about the future, but also serve as a starting point for working out and implementing an active development program.

The problem is that, as opposed to physics, medicine, structural engineering, or agronomy, economics is basically not an experimental science. There are no laboratories where you can take a hypothesis and carry out some procedure that verifies its accuracy. Usually, the hypothesis is first proclaimed, and only subsequently demonstrated to be correct—or not—on the living organism of the economy and society. Following this path to truth has turned out, on more than one historical occasion, to be extremely costly. In our part of the world in particular, we have experienced this by way of the historical verification of hypotheses about the utility and effectiveness of central planning, which helped to solve many problems in the initial phase of socialism but ended up becoming an institution that weighed down the economy and impaired its capacity for adaptation. As if this were not enough, in many postsocialist countries, this was followed immediately by the deleterious effects of a neoliberal policy of systemic transformation.

In opting for pragmatic economics—resting on the confirmation of scientific hypotheses in practice, in action, in real economic processes—it is therefore necessary to demand skill in carrying out applied economics, because people are not guinea pigs to be experimented on.

Science is powerful, then, but there are sometimes occasions when it has insufficient power to succeed. Unfortunately, scientific truth often comes second. Pseudoscientists or downright ignoramuses, with a greater affinity for simplistic interpretations than for complicated scientific proofs, sometimes get the upper hand. A British literary critic summed it up splendidly, writing that we all have our idiots. . . . The main failings we have in common would seem to be that we are willing to believe the most utter nonsense if it can be made to fit our oversimplistic, preconceived, overidealized or self-serving views of the world; and that we naïvely assume that those whose myths, language, money and power control or would control our lives and minds have our best interests at heart. The idiots need not be political leaders—they can be the media, the multinational corporations, other economic powers, cultural movements, systems of belief, ideologues and ideologies of all varieties.¹¹

Idiots are best avoided, and idiocy unheeded. First of all, we need to know how to distinguish it from things that are comprehensible and reasonable. This is by no means easy, in economics or in the other social sciences. In the general view, after all, eminent economist is a synonym for well-known economist. Yet the well-known ones are not those who discover important phenomena and processes, but those who appear on television and write in the newspapers. What they write there is less important. A high profile is everything. Banking analysts with blinkered views, working on commission from their sponsors, have been built up into opinion-shaping independent economists. Scraps of nonsense published in newspapers have print runs in the hundreds of thousands, or sometimes even millions, whereas the more elaborated truths in scientific books appear in the hundreds of copies. Professors stalk newspapers (more often), and newspapers stalk professors (more rarely). They feed on each other, and in the process they feed others as well. The grain is milled, the chaff remains, and the wheat is lost.

It is clear that the best antidotes for stupidity and arrogance are wisdom and knowledge. This is what makes verbal combat worthwhile. In other words: Read a great deal, listen to others, write a little, and talk to those who are willing to listen—but most of all: think. Struggling to master her own words, the poet asks:

Why did I take bad things

for good ones

and what would it take

to keep from doing it again?¹²

Although a pinch of imagination and brilliance never hurts, there is no room in science for poetry. This makes it all the more imperative to concentrate on a fundamental, real problem that, strangely enough, is often overlooked: truth and lying in economics and economic policy. This is more than a matter of who is right and who is wrong. It is possible to make mistakes by starting from false assumptions, using the wrong information base, applying statistics inaccurately, or drawing the wrong conclusions. People can also fall under the sway of dubious ideologies, only to discover afterward that there are other ideologies that are no worse, and are perhaps even better. All of this is morally excusable. Humans err, and this includes economists.

Policy and economic thought meander along various paths. The trails they blaze can inspire acknowledgment and approval or, at other times, distaste and negation. There is always a political context, and it is always important who is making the judgments, who is being judged, and when. Two extreme attitudes, stemming from completely different motivations and explained by different psychological factors, can be distinguished. On the one hand, we encounter conservative views, held with greater obstinacy than they deserve, which manifest themselves in an irrational loyalty to received canons, a doctrinaire stance that could just as well be termed dogmatism. On the other hand, there is the facile swing to the opposite flank, the radical shift of views that jumps from apologetics to criticism of the views held earlier. Old ideas and perspectives undergo revision.

When Jeffrey D. Sachs, a master of public relations among economists, published a book titled The End of Poverty: How We Can Make It Happen in Our Lifetime¹³ in 2005, he ceased forever to be revered as the man who transplanted radical liberalism to Poland in the early 1990s, and tried to transplant it to the neighboring countries. The influential British-American weekly The Economist tagged him a leftist, a term of invective in the Anglo-Saxon countries. He had simply looked the facts in the eye and realized that things had taken a different turn from the proclamations of neoliberal theory from which he had gradually distanced himself.

This type of evolution—rather than radical change and the zealous rejection of one’s own earlier convictions, which may have been appropriate, in part, in a different historical and political context—need not be unseemly or blameworthy. Only cows never change their views; doing so is becoming of enlightened economics professors, as long as they do not go overboard and, like religious converts, denounce their own previous views on principle.

It can be assumed with a degree of probability approximating certainty that, had the Soviet Union existed a decade longer—not something that is difficult to imagine—almost all the prominent post-Soviet leaders and influential politicians of the 1990s would have been high-ranking party or government officials in the structure of the communist state. Almost all the stars of the social sciences would have argued completely differently in their publications and lectures than they began doing enthusiastically—or overenthusiastically—in 1991. It would have been the same in Romania, Bulgaria, or the former Czechoslovakia, although not in Poland, Hungary, or the former Yugoslavia, because of the earlier quasi-democratic and pro-market reforms implemented in the latter countries in the 1970s and 1980s. These reforms, aiming for partial political and economic liberalization, had already introduced a certain intellectual unorthodoxy and new thinking under the socialist regime. These are only examples. More can be found all over the world.

As opposed to the evolutionary and smooth transition from Marxist revisionism to theories favoring a social market economy, or from market fundamentalism to a more pragmatic, pro-development orientation, some jumped from one extreme to another. Whether influencing opinion formation through the media or quasi-scientific manipulation, or doing serious harm to economic practice, they made a significant impact. Books on postsocialist adaptation sometimes borrowed their cover designs from far different works of a bygone era, as long as they featured the ubiquitous title Economic Problems of the Transformation Period, with gold letters on a red background. Someone quipped that socialism is the difficult transition period between capitalism and capitalism.

The animus typical of recent religious converts is no rarity in the social sciences or the political sphere, particularly when popularity or money is at stake. Many former Marxists have became apologists for neocapitalism, with some vaulting at the first opportunity from the left to the right (in the past, people jumped in the opposite direction). Proponents of free markets have become advocates of state interventionism. Liberals have grown infatuated with populism and populists have become liberals. Members of the labor party have gone over to conservatism. Militarists have become pacifists. Backers of the civilizing mission of colonialism have become warriors in nationalist sociopolitical movements. Agnostics and secular intellectuals have been born again as religious thinkers. Black has become white and white has become black, as if there were no other colors of the rainbow. Psychologically, extremism of this sort can be explained by the desire, sometimes even subconscious, to compensate for past sins, including those that were never committed. Given the fact that there is nothing we can do to make our past selves any better, we resolve to be veritable saints in the future. In real terms, it’s often enough to make you cringe, not that the neophytes or those cheering them on ever notice.

Let’s be honest: This isn’t the biggest problem. The worst thing is the lying in the so-called science of economics. I add the so-called because this is the moment when it turns into pseudoscience. The intentional propagation of falsehood is, in its essence, the opposite of science. Montaigne wrote that, If falsehood had, like truth, but one face only, we should be upon better terms; for we should then take for certain the contrary to what the liar says: but the reverse of truth has a hundred thousand forms, and a field indefinite, without bound or limit.¹⁴

The thing about economics—as with perhaps all the social sciences—is that the play of the true and the false (in epistemological categories) or of candor and lying (in ethical categories) is very subtle. Unfortunately, we still know very little about this subject. We frequently find ourselves in the fervor of what seems to be a scientific debate, when in fact we are up to our ears in an ideological dispute about differing values, or a political discourse that in fact revolves around competing interests, except that its actual intentions lie concealed behind lovely words about ostensible public goals.

It is understandable that scientists have views, including political ones. After all, they are citizens. But it is not good when, out of ideological motivations or, even worse, as a result of being hired to perform tendentious paid work, they use science as a political weapon. The worst thing of all is when scientists allow themselves to be drawn into the whirlpool of endless political conflicts and permit their science to reflect the structure of political interests. If everything boiled down to right and left, then we should have right-wing and left-wing economists and ecologists. However, the political scene is far more complicated than such a dichotomy, and this fact is reflected in science when it serves political ends. Even if it seems to people that they are fighting for the truth and following objective scientific procedures, they have in fact been drawn into the political struggle. That struggle is about interest groups, and not about the truth.

The pressure can flow in the opposite direction. Making use of the popular media without which nothing can be accomplished these days, politics disturbs the scientific process by attacking nonpartisan scholars engaged in the pursuit of truth. If these scholars’ discoveries and theories could lead to rational actions that would be disadvantageous to the interest groups, then those interest groups denounce the scholars and accuse them of error. Things become embarrassing when other scientists allow themselves to be dragged in. Egged on at first from outside, often without even being aware of the fact, and then later following their own impulses, they fight like gladiators, or rats. This is the reason that so many debates and disputes bearing on the most important theoretical questions are carried out not in professional journals, but in mass-market newspapers and the electronic media.

Economics is thus political in the sense that some economists simply lie, out of various motivations that are often related to doctrinal or ideological zealotry. Or they may do so out of their political sympathies, or even for the trivial reason that it pays. Furthermore, inertia comes into play at a certain point. It is easier to keep clawing through a thicket of untruth than to admit to having been wrong, as if sticking to a position can make it right.

When learned economists err in what they say and write, we can continue the discussion on substantive grounds. However, we have a major problem when they know how the facts stand but nevertheless publicly say and write something different because it serves certain ideas shared by narrow elites, or because they are paid by interest groups to enunciate theories, decked out in pseudoscientific trappings, that they know to be false. The problem is also an ethical one.

Despite the fact that psychology in particular has a great deal to say about the essence of lying,¹⁵ we often cannot tell whether someone is merely consistently mistaken or lying outright. Even when we know that someone is simply lying rather than continuing to be wrong, it can be impossible to prove. If the person is deliberately lying, we are wasting our time in attempting to persuade him that he is wrong.

It is difficult to find a better recent example than the pseudoscientific debate about the previously mentioned flat tax, which is all about cutting taxes for a narrow group of beneficiaries and shifting the cost of the operation onto low-income taxpayers (the real aim), while claiming—or, in this case, lying, unless someone is in fact persistently wrong because he cannot understand what is going on—that it is all a matter of creating better conditions for capital formation and investment (the declared aim).

This syndrome explains the impossibility of convincing some adversaries, who otherwise seem to be enlightened economists, of views that are correct and at times obvious. They understand that these views are reasonable, but they voice different views. What can be done? At the very least, enough to convince others—listeners, viewers, and above all readers—that our interlocutor is wrong. The audience will have the impression that the opponent is in error, which is no small accomplishment. In other words, when it is impossible to demonstrate that someone is deliberately misleading others, it is at least worthwhile proving publicly that they are wrong.

There are pseudoscientific debates in which it is impossible to arrive at intellectual agreement because the differences inhere not in the officially expressed views, but in the intentions. This occurs more frequently in politics than in science, although we should be under no illusions about the latter field. For understandable reasons (the pressure of conflicting interests), economic science is particularly vulnerable to this, but the danger exists in other disciplines. Pharmacology, medicine, and ecology—the science of the natural environment of humans—should be mentioned. Disputes about the effectiveness of some drug or the current debate about the causes and effects of global warming are the best examples. For money—for big money in some cases, and for next to nothing in others—it is possible to purchase whole institutes, or think tanks, that will prove whatever the customer wants. Why shouldn’t it be the same in economics? Sometimes it is.

Of course, it costs money to hire intellects—often not inconsiderable ones—that are ready to argue in pseudoscientific categories in favor of the viewpoints desired by the sponsors. Aside from hiring politicians, this is a profitable form of investment in a unique form of human capital. It is also possible to hire people who simply think in a useful way and, with the best of intentions and in line with their own convictions, say things that, although untrue, are advantageous for a given interest group. These people will find sponsors interested in supporting such convenient research and propagating its results.

Following this principle, many departments of economics and social sciences at universities—especially American ones—went over to neoliberal positions in the 1980s and 1990s. With few exceptions, the business schools opened in this period took on a similar coloration. The importance of these changes should not be underestimated. The eminent American anthropologist David Harvey observes that the eventuality of the prevalent ideas being imposed by the ruling elites is overlooked, even though there is clear evidence of the mass intervention of business elites and financial interest groups in the creation of ideas and ideologies through investment in research centers, the education of technocrats, and control of the media.¹⁶ It is worth noting, by the way, that each and every one of the 247 newspapers in Rupert Murdoch’s media empire supported the invasion and occupation of Iraq.

Nor is it strange that neoliberal research centers, analytical organizations, and institutes that support the special interests of big money and its influential leaders are especially active, in view of the financing available. In the United States, where liberalism denotes a socially progressive orientation, they are sometimes referred to as neoconservative. They proclaim the apotheosis of the unfettered market and private property while fighting against the state and demanding the far-reaching curtailment of its economic intervention, budgetary redistribution, and social policy. They use such concepts as freedom and entrepreneurship, or choice and the law, even as they manipulate the meaning of these terms and subordinate the processes associated with them to special interests. Neoliberalism—as opposed to authentic, sincere liberalism, which correctly promotes such values—has nothing to do with genuine democratic politics, economic effectiveness, or social rationality beyond exploiting these beautiful ideas to serve the needs of a narrow elite at the cost of the rest of the population. Unfortunately, it must be admitted that neoliberalism does this skillfully and adroitly.

Around the world, and especially in the Anglo-Saxon countries, there is no lack of analytical-research centers that make up a well-developed network supporting the neoliberal tendency. Along the way, they also produce many valuable publications. An attractive name is essential for these centers. In Washington, aside from the libertarian Cato Institute (founded in 1977, with an annual budget of more than $20 million), we can thus find the influential American Enterprise Institute and the quintessentially neoconservative Heritage Foundation. London has its Institute of Economic Affairs; Sweden, its Center for Business and Policy Studies (SNS); and Italy its Istituto Bruno Leoni. The Institute for the Economy in Transition is doing very well in Moscow, along with numerous branches of British and American centers. There are a few in Warsaw, where the Adam Smith Center has a particularly high profile. Naming this extremist neoliberal center after the great figure universally regarded as the creator of classical liberal economics is an intellectual abuse.

After a time, the committed economists and other researchers fall victim to their own zeal, and their work becomes doctrinaire and perfunctory. They start believing the things they say, and the media connected with the same ideologies and interest groups cheer them aggressively on. This is more a matter of faith than of knowledge, more ideology than science. From this point, some might even be inclined to carry on the fight for free, for the sake of the ideal. It would be strange if they voluntarily showed as much dedication in the name of the socially excluded poor, unemployed, and homeless, or the struggling labor unions, or simply in the name of the majority of the population and the cause of development—but there are no commissions from such sources. Such research, if done at all, must either be what is known as private scholarship or be state financed, and the state is neoliberalism’s enemy number 1.

In the fervor of the unending public debate, big money and its lobby need professional-sounding, persuasive voices to convince wider audiences of the supposed superiority of some solutions (those that favor the minority and special interests) over others (that favor the majority and the general interest). Such voices are especially important in democratic societies, because they must drown out whatever parts of the media remain authentically independent, refusing to be servile and uncritical toward the egoistic interests of big capital—no matter how hard it is to resist the lucrative inducements to do so. In the final analysis, big money not only sponsors the market, but also inundates it with a mass of well-paid advertising. Advertising space is either sold or not; everybody needs to make a living, and not necessarily at poverty level.

The media are in an especially comfortable position, because they can always make themselves heard and can outshout everyone else. Paradoxically, although everyone knows who they are, the media enjoy a kind of anonymity. When the media and journalists are criticized in general, it is never clear exactly who is being condemned. This resembles the situation regarding complaints about politics and politicians. The media, as opposed to politicians, can resort to the effective tactic used by thieves who shout Stop! Thief! Almost everyone has bitter words to say about the media—almost everyone, because self-critical is the one thing that the media are not. There is also an unwritten law that one media outlet never criticizes another. They criticize politicians, but not all politicians, and not all the time. They do it selectively. Often they fail to criticize precisely the ones who deserve it, and instead criticize those they are paid to criticize. The criticism may be ideological and it may be personal. Its true intent is always camouflaged.

The political world fears the media and attempts to manipulate them (that’s politics), but often finds itself in the position of the dog being wagged by its tail. The media manipulate politics effectively, and certainly forcefully, not so much by expressing public opinion, with which politicians must reckon, as by shaping it. The fear of the media is so great that accusations against them are usually expressed in general terms. It is a rarity to carry out the needed research and publish the results, and in any case, the media themselves must be used to deliver those results to a wider audience. Always knowing best and knowing how things really are, the media delight in undermining such skeptical findings.

Accusations about media bias flow from various, often opposing political corners and areas of public life. In the United States, both the Republicans and the Democrats complain, although the latter should do so less, because the media seem to favor them. When news comes out in America about the growth of the GDP, the Republicans receive from 16 to 24 percent less favorable ratings than the Democrats. The spread ranges from 0 to 21 percent on news about unemployment. The New York Times has carried fewer positive economic stories when the Republicans are in office. On the west coast, the situation at the Los Angeles Times is precisely the opposite.¹⁷

Interestingly, researchers have discovered that it is not true that bad news sells best, at least when it has to do with economic processes. In the United States, because it is impossible to generalize, good news produces more follow-up stories on the same issue, and these follow-ups are also much better written. They offer coverage that is broader and more in-depth. The Democrats would surely charge the authors of this research with bowing to manipulation by Republican interest groups and make accusations of bias against media that cover Democratic successes objectively.

The degree of disinformation, distortion, and tendentiousness depends on the nature of the story being covered. I saw this from the inside on the two occasions when I was in charge of the Polish economy (1994–1997 and 2002–2003), and I have consistently seen it from the outside at all other times. When the growth in production plummeted under neoliberal governments, the neoliberal press, radio, and television reported that the situation was improving. When the rate of growth accelerated under a pragmatic center-left administration, the same media reported that it was accelerating either too slowly or too rapidly, and the populist-oriented press complained the whole time that the growth was too slow, and, of course, that it was inequitable.

Let’s sum up. This summary may serve my audience—viewers, listeners, and especially readers—as a kind of methodological guide for skillfully moving through the thickets of unceasing economic debate, and especially the public debate fought out in the media and politics. Someone—an ideological formation, a party, a research institute, a newspaper, or an individual—states a view—for instance, that limiting the role of the state (i.e., the government) and weakening its position as an economic player favors economic growth. Now what? Should we agree or not? Should we believe it or not? I am not talking about a situation where people understand nothing, believe no one, and are happy with that. They’re to be envied! To evaluate this view—to agree with it or reject it—already requires knowing a great deal about the subject. Those who have too little knowledge to understand the issue have only the alternatives of believing or not. It is better, of course, to know than to believe.

In accepting or rejecting someone’s point of view, it is worth considering the fact that its proponents can be in three hypothetical situations:

They believe what they say and regard it as the truth.

They regard what they say as the truth and feel that it reflects the way things are.

They know that what they say is not the truth.

In the first variant—they believe what they say and regard it as the truth—we are dealing with a kind of profession of faith, with ideology rather than science and with doctrine rather than a desire for objectivity. Rational arguments are of little use on this level. Using them may be fruitless, particularly in conducting polemics with the demagogues who abound in the pages of history, and especially in hard times or periods of great change. Doctrinaire stances of this kind are hardly a rarity in economics and economic policy. In real economic processes and the application of economic policy, they can constitute a grave danger. Of particular danger are situations where two false ideologies and their doctrinaire proponents face each other, as is the case at present when neoliberalism comes up against populism.

In the second case—they regard what they say as the truth and feel that it reflects the way things are—we face two alternatives:

They’re right.

They’re wrong.

If they’re right, then all we can do is to understand things as well as we can, and share this knowledge and the lessons to be drawn from it with others. If they’re wrong, then we should conduct a substantive polemic in which we present a different concept supported by rational arguments. We should add that a calm, frank, substantive polemic against the opposing point of view is within the abilities of everyone who is not doctrinaire or mendacious. We can recognize the latter—some of the time—by the fact that they are reluctant to enter into frank polemics, or downright refuse to do so. They would rather talk than listen. On the other hand, those who are convinced that they are speaking the truth and understand the essence of the issue betray neither doctrinaire zeal nor the cynicism of liars. They are open to polemics and attempt to convince others while also listening to their arguments. They listen as well as talk.

In the third case—they know that what they say is not the truth—they proclaim a false point of view with premeditation. It may be wrapped in pseudoscientific rhetoric, but its proponents know better than anyone that they are spreading falsehoods. They are not wrong, as may occur in one of the variants in the second case. They are deliberately leading their audience into error. Liars are not wrong. You can be wrong involuntarily, but you have to want to lie. Why? There are three reasons:

They are deliberately proclaiming false views because it pays to do so in terms of group or personal interests.

They are advancing false theories and concepts for ideological reasons. This is not the same as the doctrinaire attitude in the first case, because here we are not talking about deep faith, but about cynicism. They know that the ideology they are presenting does not serve the officially proclaimed ends. For instance, neoliberalism does not serve the aim of social justice, and populism does not favor economic effectiveness.

They might only be wrong at first but stick so doggedly to their views that, given the belligerence prominent in economic debates and a misguided concept of professional prestige, they begin deliberately defending false views and become guilty of intellectual opportunism. People, and economists in particular, hate to be wrong, and even more to admit it—especially in public. By defending false arguments, they stop being wrong and start deliberately leading others into error.

We should add that there are different ethical dimensions to deliberately misleading people. The latter situation in particular is less morally suspect than the two preceding ones. Nevertheless, regardless of the motivation, they are all equally harmful in practice.

Deliberate deception often relies on methods that are organized and financed in particularly sophisticated ways, and is done by highly skilled professionals. Sometimes only the sponsors are aware of this for years on end, because the deceivers themselves might not know exactly who they are working for. They are hired guns. The audience is completely unaware. At best, they might become suspicious, but the discretion of the procedures applied leaves them unable to prove anything. The cold war is over, but not the psychological war. The conflicts of interests go on, together with the accompanying struggles. On our own, we are incapable of knowing when we are under fire on the front line. This time around, the weapons are words. By the time we find this out, if we ever do, it will be history.

It would be the height of naïveté to assume that the placement of carefully crafted material in the media is not practiced in the global political and economic game, during the unending pursuit of domination in terms of ideas and political and economic interests. Intelligence services interested in penetrating a given region or country plant articles, books, and radio and TV programs. The purpose is not only to manipulate general public opinion, but also to exert pressure on opinion leaders and ruling elites. Sometimes this succeeds. The game goes on all the time. The future is at stake—or, as some would have it, new worlds. And also a place in this one and only world, where there is less and less space and more and more inequality.

When following the main threads of the debate and the placement of accents, it is impossible not to notice the particular activity of certain influential global (Western) media and specialized research centers bent on discrediting China around the turn of the century and Russia in recent years. In the case of China, the country’s crushing economic success (which not everyone wished them, but from which everyone is trying to profit) has changed this, but Russia is still under attack—if for no other reason than to prevent that vast land from repeating the Chinese success. These two countries have been quick to respond by using their own special channels to place material in the media, including the Western media. To a large degree, the Islamic and some of the Western Hemisphere Hispanic countries are painted in predominantly dark colors. There is no lack of further examples.

This is not a matter of accident or ignorance, or of a purely doctrinaire attitude. Decades ago, there was nothing accidental about the way the intelligence wing of the KGB, the Soviet secret service, effectively planted stories in the media of countries (from the Third World to the First World, and even including the United States) that were crucial in any given phase of the great game of the day.¹⁸ In turn, the CIA did not stand idly by, but replied in kind in those same countries, and in others as well. The difference is that although the CIA remains shrouded in secrecy in the interests of national security, the archives in the postsocialist countries have been opened, or the information has been leaked in other ways, and not necessarily with the national interest in mind.

It is possible to get lost in this matrix of truth, sincerity, ignorance, error, falsehood, and lies. We can all use our awareness of our own journeys through time and space to try to find out where we stand. Some people deliberately go on speaking falsehood so long that they become slaves to it, and end up simply believing it. Beginning as liars, they become doctrinaire. This happens rather often in economics. There are also times when people’s principles lead them to go over to a position of honest science and concern for the truth. It can happen. Such cases occurred, for instance, during the epoch of orthodox central planning in the socialist economies, when there were those capable of tearing themselves away—some sooner, and others later—from the dogma of the time. They went over to a scientific position without falling into the other, antisocialist extreme. The most outstanding contemporary economist from this part of the world, János Kornai, evocatively describes his own experiences of this kind in his most recent book, By Force of Thought.¹⁹

All this is also very important in the reception of what we read and hear, and above all in polemics. It is necessary to argue in one way with someone who is scientifically honest but with whom we disagree, or whom we do not fully understand because we cannot keep up with thinking that is ahead of its time. With a doctrinaire liar or scientific or media hack, we must argue in a completely different way. As a rule, such problems do not exist in genuine science, where we find only an authentic desire to get to the bottom of things and understand the rules governing the processes that interest us. In public life—including the pseudoscientific kind—and during political debates, we frequently find ourselves dealing with the three other possibilities: doctrinaire, mistaken, or lying.

So now we return to the example of the view that limiting the role of the state and undermining its position in the economic process favors growth. This is clearly not the case, as we will show in our further considerations. It has, furthermore, been proven irrefutably in the literature on the subject,²⁰ but a handful of other arguments are still worth citing. Let us emphasize at once that the opposite assumption, that increasing the role of the state and strengthening its position in the economic process favors growth, is also false. Nor is a simple averaging out of these two hypotheses—that leaving the role of the state and its position in the economic process unchanged favors growth—true. These issues are far more complicated, and all that we shall say for the moment is that the state has a significant role to play in the process of economic growth, and its position in this matter is far from inconsiderable, but in concrete terms this depends on still other factors that are completely excluded from these statements. If the view in question is incorrect, we must now answer the question, Are those who proclaim it doctrinaire, mistaken, or lying? No other alternatives exist, unless we take into account some additional variants that combine these three. It should now be easier to resolve this kind of dilemma, because we know what to look for, how to ask the questions, and how to formulate the criteria. The rest remains entangled in the thickets of the beautiful science of economics.

It is still possible to write in an accessible way about highly complicated economic problems and the philosophical, cultural, social, and political issues that inevitably accompany them. Perhaps it is necessary to do so, because that is the way to hit home, to reach a broader audience. This does not at all mean that it is possible to indulge in such lazy and slippery thinking as to pronounce banalities and generalities about the necessity of privatizing almost everything, cutting taxes, reducing social expenditure, and limiting the role of the state in the economy. Such naïve neoliberalism has already done enough damage.

When writing in a simple way, we must still observe the requirements of scientific rigor while avoiding the opposite extreme. Argumentation that strains to sound scientific is all too common but is only ostensibly scientific. Overblown vocabulary, exaggeratedly formalized proofs, and flowery writing where a few clear words suffice cannot add conceptual weight or scholarly authority to the argumentation, but can make it needlessly obscure. It is therefore necessary to oppose both academic vulgarity and mannerism.

In science and when writing for a general audience, precision never does any harm—far from it. The methods and language of mathematics have also added a great deal to economics. Although economics is a social